EconLog Book Club: For a New Liberty, Chapter 11
In this chapter, Rothbard advocates the abolition of publicly-owned streets and roads:
Abolition of the public sector means, of course, that all pieces of land, all land areas, including streets and roads, would be owned privately, by individuals, corporations, cooperatives, or any other voluntary group ings of individuals and capital.
He begins by explaining that in a libertarian society, street-owners would take over many of the functions that governments now perform: security, cleaning, lighting, enforcing traffic rules, etc. While it would be within owners’ rights to impose any sort of crazy rule, market forces strongly encourage a high degree of uniformity:
Wouldn’t some owners designate red for “stop,” others green or blue, etc.? Wouldn’t some roads be used on the right- hand side and others on the left? Such questions are absurd. Obviously, it would be to the interest of all road owners to have uniform rules in these matters, so that road traffic could mesh smoothly and without difficulty. Any maverick road owner who insisted on a left- hand drive or green for “stop” instead of “go” would soon find himself with numerous accidents, and the disappearance of customers and users.
He then accuses government of inefficiently subsidizing the quantity of highways while inefficiently underpricing their use. The problem is especially acute, he notes, during peak times:
The fact that gasoline taxes are paid per mile regardless of the road means that the more highly demanded urban streets and highways are facing a situation where the price charged is far below the free-market price. The result is enormous and aggravated traffic congestion on the heavily traveled streets and roads, especially in rush hours, and a virtually unused network of roads in rural areas.
Wouldn’t a giant network of toll roads be a major inconvenience? Not so – Rothbard points to many now-familiar technological advances that take the pain out of toll collection.
The chapter ends with a brief discussion of the history of private roads in Britain and the U.S.
This has always struck me as the least convincing chapter in the book. Yes, Rothbard makes many points that most economists would accept: It’s inefficient for government to heavily subsidize roads, then let people use them whenever they like at zero marginal cost. But he doesn’t offer any remotely practical plan to privatize existing roads, much less explain how privatization would avoid severe monopoly problems. (I propose one Rube Goldberg solution here, though even I have serious doubts about it).
Admittedly, if government had never gotten into the road business, the road network would have grown organically with the rest of the economy, and market forces would have kept monopoly problems in check. Before people built homes, they would have made sure they weren’t at the mercy of a single road supplier. At this point, unfortunately, the owner of a privatized road would often be in a position to extract virtually the entire value of the surrounding real estate (minus a mountain of deadweight costs).
Of course, if new entry were feasible at a reasonable expense, any monopoly problems would only be temporary. Indeed, the fear of potential competition might lead road owners to charge competitive prices from the get-go. But Rothbard doesn’t even mention the standard reason for skepticism about new road construction: The hold-out problem. Stripped of the power of eminent domain, how could a private corporation build a major new highway in a developed area?
I am aware, of course, that some libertarians argue that the hold-out problem has been greatly oversold. Maybe they’re right, but it’s still odd for Rothbard to completely ignore the objection.